In Costa Rica, the Rental Law defines the rights and duties of both the lessor and the lessee; based on the fact that there is or will be a contract between parties. Now, the amount to be paid for rent varies according to the specific conditions, but how do the rents in colones work and what is the difference with making the payment in dollars?
Can you rent in another currency or only in colones?
In Costa Rica, the agreed price in the rents for housing must be in colones and can be updated at the end of each contract year.
However, leases can be agreed in foreign currency as long as there is agreement between the parties. This modality, unlike the rentals in colones, must maintain the exact sum during the entire term of the contract, that is, there is no right to adjustment or increase if the agreed time has not ended.
These conditions must be arraigned at the beginning, together with the term, the date of payment, the rights and duties of each party in case of repairs and other details.
How does the price adjustment works in rentals in colones?
Law 7527 indicates that increases in rents can only be updated at the end of each contract year and the adjustment must be governed by one of the following rules:
- If the cumulative inflation rate of the previous 12 months (year-on-year) at the expiration of each year of the contract is less than or equal to 10%. Having the owner, the right to readjust the rent in a percentage equal to or less than that.
- When the inflation rate at the expiration of each contract year is greater than 10%, the Ministry (MIVAH) will be in charge of establishing the additional percentage of increase. As long as it is not less than 10% or higher than the annual rate of inflation.
How to notify the rent increase?
This increase applies from the payment period following the one that landlord notifies the tenant of the readjustment.
The prices of rents in colones and the increases are directly related to the current situation in the country. In recent months we have seen results of inflationary situations and through resolution No. DMVAH-0011-2022-MIVAH, the Ministry said that the maximum annual adjustment to housing rent for the month of July 2022, is equivalent to 11.11%, being the highest adjustment in the last 13 years in Costa Rica.
If you have questions about the process you can read more related articles in our blog or you can contact our specialized advisors who are willing to help you at every stage of the process, both landlords and tenants.
